Be honest when disclosing information on your insurance policy

Denial of Disability benefit due to Misrepresentation
You can lose your benefits if you are not honest when filling out your insurance application.
The complainant completed an application for enhanced benefits under an Accident and Sickness Disability Policy in August 2003 which his insurance company accepted with effect from September 1st, 2003. In January 2004 he submitted a claim for payment of Disability Income Benefit and an accompanying claim for waiver of premium because of his inability to work.

The insurance company denied his claim for payment of Disability Income on the grounds that the insured did not honestly disclose pertinent information at the time of his application, which would have impacted significantly on the Underwriter’s decision.

The Application Form completed by the insured, included a question which asked “Do any of the Proposed Persons intend to seek medical advice, treatment, or have medical tests done?” The applicant responded, “No” despite the fact that his doctor had told him ten days prior, that he would be required to have some tests done which subsequently proved to be positive.

He sought the advice of the Financial Services Ombudsman who subsequently concurred with the insurance company and advised the complainant accordingly.

The second request by the insured for waiver of premiums due to his disability was granted.

Lessons Learnt

A prospective insured has a duty to disclose honestly all material facts bearing on the risk to be borne by the insurer. Information withheld or not honestly disclosed can lead to a cancellation of the policy.